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The BCBSM data shows:
Financial losses in individual lines of business -- BCBSM lost $111million on its individual lines of business in the first nine months of 2008,and expects losses to grow to $166 million by year end. The company projectsto lose nearly $264 million on individual policies in 2009.
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Risk-Based Capital position lower -- BCBSM reserves are deteriorating asmeasured by Risk Based Capital, fueled by the growing losses in the individualmarket. RBC is projected to fall from 627% in 2008 to below 450% by 2011.When RBC rapidly deteriorates below 600%, the Blue Cross and Blue ShieldAssociation -- the licensing authority that owns the Cross and Shield brands-- may begin a warning and intensive monitoring process. If RBC continues todrop, this process may conclude with the revocation of the company's abilityto operate as a licensed Blues Plan.
Membership growth in individual line of business -- BCBSM membershipnumbers substantiate dramatic growth in BCBSM's nongroup (under 65) line ofbusiness since 2006. Average BCBSM membership from January through June 2008was 109,707 members, up 95 percent from 56,324 average membership from Januarythrough December 2006.
Investment portfolio conservative -- BCBSM's investment portfoliocontributed to its financial health through September, due to theconservative, high-quality nature of investments which have collectivelyremained above market benchmarks for return. While BCBSM's investmentportfolio -- like most others nationally -- is experiencing fourth quarterlosses, those results were not factored into results that warn of thecompany's falling RBC position. If investment losses are not reversed, theprojected RBC will be worse than forecasted.
Alternative tax burden -- The value of BCBSM's state and local taxexemption was $80 million in 2007, a slight increase from $77.9 million in2003. However, the financial value to the taxpayers of Michigan of BCBSM'snonprofit social mission contributions, which extends beyond serving as thestate's insurer of last resort, amounts to an alternative tax burden on BCBSMof $311 million.
In providing the information, BCBSM complied with a data request includedin the Attorney General's Nov. 13, 2008, letter to Blue Cross President andCEO Daniel J. Loepp.
BCBSM has warned policy makers and regulators over the past 16 months thatbecause of Michigan's 30-year-old regulatory structure -- which allows allother carriers to dump high-risk individuals into BCBSM's insurance poolwithout limit or regulation -- uncontrollable financial losses on individualpolicies will escalate and lead to BCBSM's entire business becomingfinancially unstable in the near future.
"Michigan's individual health insurance market is set up to failfinancially," said Mark Bartlett, BCBSM executive vice president and chieffinancial officer. "It's a hard truth, especially if you oppose reforming themarket, but it is the truth. Unless comprehensive reform is achieved thisyear, the financial situation will grow into a crisis that threatens healthcare, the economy and the health insurance safety net for millions of Michiganresidents."
BCBSM also released a letter from its licensing authority -- the nationalBlue Cross and Blue Shield Association -- that forewarns of the possibility ofthe company losing its ability to operate as a Blue Cross and Blue Shieldhealth plan should its financial strength continue to deteriorate. The letterfrom BCBSA chief executive Scott Serota points to "rapidly growing andunmanageable losses in the individual market driven by a difficult legislativeand regulatory structure" as key factors in BCBSM's financial decline.
Blue Cross Blue Shield of Michigan is nonprofit and an independentlicensee of the Blue Cross and Blue Shield Association.
SOURCE Blue Cross Blue Shield of Michigan
